The Real Estate Capital Institute®

Tuning a Permanent Mortgage


Chicago, Illinois -- (ReleaseWire) -- 01/26/2007 --Borrowers feast on extremely competitive loans as lenders fund record amounts of debt in a highly competitive realty capital market. Rates, amortization schedules, prepayment provisions, good faith deposits and other traditional underwriting terms are liberally negotiated.

Creative lenders find unique methods of offering even more attractive terms and conditions. Some examples include:

• Collateral substitution rights – offered chiefly by balance-sheet lenders such as life insurance companies and banks.
• Tenant cancellation clause – acceptance of rent roll subject to cancellation, even if lease terms are at market price.
• Waiver of completion guarantees – if minimal construction needed as part of cash flow earnout.
• Prepayment flexibility – alternative to shorter-term bank debt deals. For example, a quarter-point rate premium buys par (or near par) pricing on a five-year deal.

John Oharenko, a member of the Advisory Board of the Real Estate Capital Institute, suggests “fierce bidding among lenders demands very creative solutions for structuring loans. Any underwriting advantage helps win deals above and beyond rate and term.”

The Real Estate Capital Institute is a research organization dedicated to studying debt and equity markets for commercial properties in the United States. The Institute's website ( offers various information on fixed and floating rate debt pricing. Also, interest rate market updates are available on an hourly basis by calling the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825.)